Ever since the inception of GST, the government has been dealing with the issue of mismatches in GST liabilities between GSTR-1 and GSTR-3B. Now, the government has inserted a new Rule 88C to the Central Goods and Services Tax (CGST) Rules, 2017, to provide for automated intimations being sent to taxpayers over GSTR-1/IFF vs GSTR-3B mismatches. These intimations will be sent out by the GST portal when the tax payable in the GSTR-1/IFF exceeds the tax payable in the GSTR-3B by a defined amount or percentage.
If the taxpayer fails to pay this amount or fails to give a reason why the amount remains unpaid, then another new amendment to the CGST Rules now provides for blocking of GSTR-1 filing for the subsequent period. The new changes to the law will facilitate taxpayers to pay/ explain the reason for the difference in liabilities without the intervention of the tax officers.
What is Rule 88C?
The CBIC inserted a new Rule 88C to the CGST Rules to provide for the automated intimations being sent to taxpayers over GSTR-1/IFF vs GSTR-3B mismatches. These intimations get sent by the GST portal where the tax payable in the former exceeds the tax payable in the latter by a defined amount or percentage.
Rule 88C further provides for the taxpayer to either pay the differential liability, along with interest under Section 50, through Form GST DRC-03 or explain the difference in tax payable on the common portal.
It has been a while since taxpayers have been receiving notices for GSTR-1 vs GSTR-3B mismatches. However, with the new changes to the GST law, the government now has the power to demand unpaid liabilities, block return filings, and initiate recovery proceedings.
Form DRC-01B
Under Rule 88C, taxpayers whose tax payable reported in the GSTR-1/Invoice Furnishing Facility (IFF) exceeds the tax payable furnished in the GSTR-3B by such amount and percentage will be intimated in Part A of Form GST DRC-01B. Hence, the government has notified a new Form GST DRC-01B, and taxpayers found to be non-compliant under Rule 88C will be notified of such differences electronically on the GST portal using this form. A copy of the intimation will also be sent to the taxpayer’s registered email address.
Once served with the intimation, the taxpayer will have the option to pay the differential tax liability, along with interest under Section 50, using Form GST DRC-03 or explain the aforesaid differences in tax payable on the common portal within a period of seven days. Irrespective of whether the taxpayer pays the differential liability or chooses to give an explanation, the same will need to be furnished using Part B of Form GST DRC-01B.
Reasons for mismatches between GSTR-1 and GSTR-3B
Mismatches between the GSTR-1 and GSTR-3B typically arise due to-
- Reporting of supplies correctly in the GSTR-1 but under the wrong table of the GSTR-3B
- Time differences in reporting invoices and the corresponding debit/credit notes
- Duplication of an invoice in the GSTR-1 or non-recording of an invoice in the GSTR-3B
- Taxes being paid under an incorrect tax head or by entering incorrect tax rates
- Supplies getting amended after the date of filing of the GSTR-1 return
- Typographical errors in reporting
The effective date of the new Rule 88C
Rule 88C has been notified by the CBIC. However, the effective date has not yet been notified. The new rule will only apply when there’s a mismatch in tax payable between the GSTR-1 and 3B by a certain amount/percentage. This amount/percentage is also yet to be notified.
The time limit for replying to DRC-01B
When a taxpayer is served with the intimation under Rule 88C for differences in tax payable between their GSTR-1 and GSTR-3B, they are given a period of seven days to respond to the intimation. Within those seven days, they need to either pay the tax or explain why the amount remains unpaid.
Blocking of GSTR-1 filing under Rule 59(6)
Rule 88C governs the manner of sending automated intimations by the common GST portal for cases of tax payable differences between GSTR-1 and GSTR-3B. However, what happens in case taxpayers do not comply with these intimations? The CBIC has now also amended the CGST Rules with new clause (d) to Rule 59(6) to provide for blocking of GSTR-1 for non-compliant taxpayers under Rule 88C. This means that the government can now block GSTR-1 filing for all taxpayers who do not reply in time to the intimation served under Rule 88C.
Taxpayers will not be allowed to use both Form GSTR-1 or IFF for a subsequent tax period unless they have either deposited the amounts specified in the said intimation or replied explaining the reasons for non-payment.
Recovery proceedings under Section 79
When a taxpayer-
- Fails to pay the tax due under Rule 88C, or
- Fails to provide an explanation as to why the tax remains unpaid, or
- Provides an explanation or reason that is not found to be acceptable by the proper officer,
Then the officer can initiate recovery proceedings under Section 79.